Governor Newsom Signs Cannabis Trailer Bill Creating The Department Of Cannabis Control

On May 14, 2021 the California Bureau of Cannabis Control issued a press release announcing Governor Newsom’s “California Comeback Plan” which proposes $100 million in grant funding for local governments to complete environmental studies, license reviews, and mitigate environmental impacts. Additionally, the Governor proposed a consolidation of California’s the three California State Cannabis Agencies – the Bureau of Cannabis Control, CDFA’s CalCannabis Cultivation Licensing Division, and CDPH’s Manufactured Cannabis Safety Branch – into a single, new state department called the Department of Cannabis Control (DCC).

AB 141 which addressed the consolidation aspect of the Governor’s plan was signed into law on July 12, 2021.  Governor Newsom has appointed Nicole Elliott to lead DCC as its first Director.  In addition to the creation of the DCC, AB 141 also includes the following provisions:

• Changes references in state law from the three state licensing authorities to DCC.
• Modifies the timelines and requirements related to provisional licensing.
• Creates a Deputy Director of Equity and Inclusion to lead DCC implementation of the California Cannabis Equity Act and incorporate equity and inclusivity throughout DCC’s programs.
• Allows licensees to provide trade samples to other licensees to market cannabis and cannabis products after DCC adopts regulations governing these processes.
• Allows DCC to use emergency regulations to consolidate the regulations previously adopted by the three cannabis programs and make clarifying or consistency changes.
• Requires DCC to post information on its website beginning January 1, 2022, related to license suspensions and revocations, final decisions, and county of license issuance.

How The Consolidation Affects You.

The State relaunched the California Cannabis Portal, www.cannabis.ca.gov. It includes expanded information about cannabis license application, business types, regulations and consumer information. For now, you do not need to take any specific action. The DCC will share additional information during the coming days and weeks, including updated contact information and answers to common questions.  Old email addresses for staff will redirect to their new DCC email address for several months. If your point of contact changes, you will be provided with updated contact information.

Cannabis businesses – Your license or license application transferred to DCC automatically. You do not need to submit a new license application. Your current license is still active, even if your license certificate lists the old licensing authority’s name. Your license will still expire at the time listed on your license certificate. Email licensing@cannabis.ca.gov with any license or application questions or info@cannabis.ca.gov with general questions.

Local governments – DCC staff will continue to email your office regarding applications to confirm compliance with local requirements. Email locals@cannabis.ca.gov to update your point of contact or send the DCC a copy of your most recent ordinance.

Law enforcement – You can continue to coordinate investigations or complaints with your existing points-of-contact. Email enforcement@cannabis.ca.gov to reach the DCC enforcement team.

Researchers – The consolidation does not affect your grant funding or the amount you were awarded by the Bureau of Cannabis Control. Email questions or required grant reports to grants@cannabis.ca.gov.

State Of California’s Support Of The Cannabis Industry

The DCC licenses and regulates commercial cannabis activity within California. DCC works closely with businesses and local jurisdictions to create a strong legal cannabis industry and a safe and equitable marketplace. DCC develops and implements progressive cannabis policies with robust protections for public health, safety and the environment.

Developments like this contradict the basis of classification of cannabis under Federal law which makes cannabis illegal.

The Anti-Federal U.S. Climate

The Federal Controlled Substances Act (“CSA”) 21 U.S.C. § 812 classifies marijuana as a Schedule 1 substance with a high potential for abuse, no currently accepted medical use in treatment, and lack of accepted safety for use under medical supervision. Although you can still face federal criminal charges for using, growing, or selling weed in a manner that is completely lawful under California law, the federal authorities in the past have pulled back from targeting individuals and businesses engaged in medical marijuana activities. This pull back came from Department of Justice (“DOJ”) Safe Harbor Guidelines issued in 2013 under what is known as the “Cole Memo”.

The Cole Memo included eight factors for prosecutors to look at in deciding whether to charge a medical marijuana business with violating the Federal law:

• Does the business allow minors to gain access to marijuana?
• Is revenue from the business funding criminal activities or gangs?
• Is the marijuana being diverted to other states?
• Is the legitimate medical marijuana business being used as a cover or pretext for the traffic of other drugs or other criminal enterprises?
• Are violence or firearms being used in the cultivation and distribution of marijuana?
• Does the business contribute to drugged driving or other adverse public health issues?
• Is marijuana being grown on public lands or in a way that jeopardizes the environment or public safety?
• Is marijuana being used on federal property?

Since 2013, these guidelines provided a level of certainty to the marijuana industry as to what point could you be crossing the line with the Federal government.  But on January 4, 2018, then Attorney General Jeff Sessions revoked the Cole Memo.  Now U.S. Attorneys in the local offices throughout the country retain broad prosecutorial discretion as to whether to prosecute cannabis businesses under federal law even though the state that these businesses operate in have legalized some form of marijuana.

What Should You Do?

Given the illegal status of cannabis under Federal law you need to protect yourself and your marijuana business from all challenges created by the U.S. government.  Although cannabis is legal in California, that is not enough to protect you and for sure you want to take advantage of any assistance or support offered by the State. Be proactive and engage an experienced Cannabis Tax Attorney in your area. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County, Inland Empire (Ontario and Palm Springs) and other California locations protect you and maximize your net profits.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.